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Andrew W. Davis & E. Brent Kelly
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Andrew W. Davis & E. Brent Kelly | June 11, 2008 |

 
   

12 Forces Shaping the Future of Videoconferencing

12 Forces Shaping the Future of Videoconferencing After many false starts, video seems poised to finally take off in the enterprise. Here's why.

After many false starts, video seems poised to finally take off in the enterprise. Here's why.

Since the first real commercial introduction of videoconferencing systems for business in the mid-1980s, the world has marveled at these futuristic devices while remaining skeptical of their performance, reliability, and ability to provide a return on investment. Videoconferencing today is largely a technology deployed by the Global 2000, although rarely very broad or deep within these enterprises, and hardly at all by small-medium businesses. This article provides a snapshot of the current video market status, a short description of some of the obstacles the technology has faced in the past and where they stand today, and a discussion of the twelve forces that are shaping the future of video.

THE VIDEO OPTIMIST

Folklore has long insisted that humans are visual beings, and that given the opportunity, people would prefer to see their colleagues on the other side of a call rather than just hearing them and/or seeing their data. For over 25 years, the thinking has been that videoconferencing usage will explode as soon as the price falls below X, or as soon as the cost of network services falls below Y, or as soon as all systems can interoperate. Figure 1 illustrates the ever moving sales hockey stick predicted by the videoconferencing optimist.


Figure 1: The moving “video explosion” inflection point

The explosion in adoption always seemed to be just around the corner, but the big bang has failed to materialize, leaving many industry vendors disappointed, and wave after wave of video innovators broke or struggling.

THE DATA SHOWS A TRANSITION MAY BE OCCURRING...

Wainhouse Research has been collecting data on the worldwide shipments of modular room and executive videoconferencing systems for over a decade, and the results show that the industry growth rate is changing. As illustrated in Figure 2, for the first half of the last decade, revenues for the videoconferencing industry were flat, despite growth in units shipped. But things have recently turned around. The compound annual growth rate (CAGR) over the last four years is 22% for revenues and 23% for units, and this growth rate is accelerating. In 2007, the CAGR is 39% for revenues and 30% for units. Clearly, the value of videoconferencing is being received by more customers while the impact of HD and telepresence is helping to solidify average selling prices.


Figure 2: Modular/executive room videoconferencing 10-year sales history

CURRENT VIDEOCONFERENCING MARKET SEGMENTS

Figure 3 reflects our view of the current structure of the videoconferencing market. We have divided the market into three segments: the experience, the products, and the environment. As illustrated in the figure, there is significant blurring between the elements in each segment.


Figure 3: Videoconferencing market segments

At the high end of the product scale are solutions we have labeled “Multi-codec” systems. These are standard products available with a single part number (rather than piece parts integrated by a channel partner). This market segment is represented by multi-camera, multi-display systems such as the Cisco CTMS 3000, Polycom’s RPX and TPX systems, Tandberg’s Experia, HP’s Halo Collaboration Suite, and similar products from Teliris. These systems embed intelligence in the “operating system” that decides how to handle incoming point-to-point and multipoint calls, whether from another multi-codec system or from an industry-standard H.323 system; which images to display on which screen; whether to zoom the camera or not; how to handle multiple audio signals and provide echo cancellation, etc.

Room videoconferencing systems are single-codec, professional products suitable for use in shared environments like conference rooms and board rooms. Most room systems are appliances; that is, they are videoconferencing systems and not general purpose computers. We track these traditional group systems in two categories: Executive systems, i.e., all-in-one designs which include an embedded LCD display and are used both as small conference room systems and personal systems; and Modular systems, which basically includes all other types of group conferencing systems. Modular room systems generally range from $5K for a codec-only to $60K for a fully-integrated system with high-end sound and display systems. Executive systems range from $3K to $10K. Today’s room systems market is rapidly moving to high-definition while continuing to provide both price and price/performance gains every year.

Desktop videoconferencing (DVC) systems, also known as personal conferencing systems, were first introduced in 1994. The early DVC systems required the user to open the computer case and install multiple boards to support the audio and video compression requirements as well as to provide ISDN network connectivity. Some big players entered this market, including Intel. The high cost ($5K), requirement for running ISDN to the desktop, non-scalable installation process, and complexity of working in the early Microsoft Windows environments doomed these DVC products to failure.

Today’s DVC market is characterized by products in many different shapes, sizes, and prices. These include:

1.) standalone software applications running on a PC or Macintosh that require only the installation of a simple webcam (i.e. NetMeeting, Polycom PVX, Microsoft OCS, Lotus Sametime, Mac iChat); 2.) dedicated videophone appliances that require only an IP network connection; 3.) client-server applications (portals) or Internet-based videoconferencing services available with several licensing models (i.e. SightSpeed); 4.) video-enhanced web conferencing products and services that are oriented more towards collaboration than outright videoconferencing; 5.) video-enhanced chat services such as AOL, Yahoo, Skype, and MSN, generally consumer-oriented; and 6.) video-enabled PBX handsets.

Some of these DVC applications appear in both the enterprise DVC space as well as in the consumer market. The huge variety of DVC configurations, the fact that some of them have no revenue associated with video, and the observation that some of the applications, such as web conferencing and Skype, use video only a small percentage of the time, make tracking the size of the DVC market an exercise in futility.

Telepresence, on the other hand, is an experience based on videoconferencing. Systems that support telepresence are relatively new. Generally costing from $80 to $500K per system, systems creating a telepresence effect provide life-size images of the face and upper body of the remote participants while maintaining a visual position and proximity perspective that allows the remote participants to appear to be sitting on the other side of a conference room table. To make the telepresence effect as real as possible, these systems tend to use very-high-quality audio and video subsystems and are often deployed in rooms where lighting and sound are carefully controlled.

When these five types of videoconferencing products are mapped into targets environments, there is significant overlap, as shown in our segment diagram. Some room systems wind up being deployed in executive offices; some desktop systems are deployed in small conference rooms as well as in home offices and cubicles; and some consumer products have worked their way into the enterprise. Cisco’s recent announcement of the CTS 500 personal telepresence system blurs the market even more.



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